w2 box 12 code W

[syracr001]

I understand that the amount shown in this box reflect both the employer contributions and my own.

However, as soon as I enter the amount this w2 box in Turbotax, my refund amount substantially drops. I thought HSA contributions were Tax free? Is there something I am missing. Is there another form I need to get this offset? please help.

Thanks!

[dmertz · Accepted solution]

You must complete the HSA section of TurboTax to provide the information needed to determine your eligibility for the HSA contribution.  Until you do so TurboTax will treat the HSA contribution as an excess contribution subject to a 6% penalty and include this in your tax liability.

[syracr001]

yup  got it now.. got the box that asked if I had a HDP.

thanks!

[meandb3]

I have an additional question along the same lines as the original post.   I have completed the HSA section in the Federal Tax Section.  My HSA contributions are 100% employee, no employer, but when I go to the State Tax  I get a message:  We've calculated an addition to your CA income in the amount of the HSA contribution, for contributions made to your HSA by your employer.   How do I delineate between employee & employer contributions for state?

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[dmertz]

There is no delineation between employee and employer contributions.  All HSA contributions made through an employer are termed employer contributions and all HSA contributions made on behalf of an individual are individual contributions, whether made by the individual or the individual's employer.  For California tax purposes, the total amount of HSA contributions made on behalf of an individual for a particular year are added to federal AGI in determining California AGI for that year.

[acouellette]

Question

My employer contributed $5000 which I reimbursed to the employer. I now understand that's the same, but when I add the $5000 to box 12, my refund amount drops by $900. That's 18% not 6%. Is there something wrong?

[BillM223]

@acouellette

"My employer contributed $5000 which I reimbursed to the employer" - Are you saying that you contributed $5,000 by payroll deduction to your HSA? If so, then it should appear in box 12 with a code of W on the W-2 (if it does, then good).

Technically, you didn't reimburse your employer; the IRS calls anything your employer contributes PLUS anything that you contribute through payroll deduction to be the "employer contribution", as confusing as that is.

As for the refund dropping, this is a good example of why you shouldn't watch the Refund Meter too closely.

Your employer removed the $5,000 from Wages in boxes 1, 3, and 5 before your W-2 was printed. This is the tax benefit of the "employer contribution" - it's never in your income in the first place.

However, until you show that you have proper HDHP coverage, the IRS considers the employer contribution to be taxable - that's why your refund drops, because the $5,000 is temporarily added back to income (line 8 Schedule 1 (1040)).

Once you go through the HSA interview and show what kind of HDHP coverage you have, the $5,000 will be removed from your income (become non taxable again), and your refund will go back up.

Take a deep breath and don't watch the Refund Meter so closely.

[mytax_2010]

I am confused the numbers.

If the employer contributes $2000, the employee contributes $5100, what number should be filled in Box 12 W?

[BillM223]

The amount on your W-2 in box 12 with a code of W is the sum of what your employer contributed to your HSA plus whatever you contributed by payroll deduction.

So the number in box 12 with a code of W should be 7100 for you.

OK? Be sure that you do not enter either the 2,000 nor the 5,100 anywhere else on the return - TurboTax will handle it correctly.